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Loans Payable (Tables)

12 Months Ended

Dec. 31, 2016

The Company’s consolidated notes payable consisted of the following at December 31, 2016 and 2015:


	December 31, 2016		December 31, 2015
Note 1 – Monaco 2014		2,800,000		3,449,631
Note 2 – Monaco 2016		1,535,501		—
Note 3 – MINOSA		14,750,001		14,750,001
Note 4 – Epsilon		5,981,806		—

	$	25,067,308	$	18,199,632

Summary of Fair Value of Debt

The fair value of the new debt is as follows:


Monaco loans	Loan one
Forward cash flows:
Principal	$	2,800,000
Interest		559,463

Total forward cash flows	$	3,359,463

Present value of forward cash flows	$	2,554,371
Fair value of equity conversion option		1,063,487

Fair value of debt	$	3,617,858

Summary of Debt Premium


Monaco loans	Loan one
Forward cash flows:
Face value	$	2,800,000
Fair value		3,617,858

Difference (premium)*	$	817,858

ASC 470-20-25-13 provides that if a convertible debt instrument is issued at a substantial premium, there is a presumption that such premium represents paid in capital. Since the total face amount of the new loans is $2,800,000, we conclude that the $817,858 was substantial and recorded that premium to additional paid-in capital.

Summary of Gain or Loss Upon Extinguishment Allocation

The allocation is as follows:


	Allocation
Derivative liabilities (share purchase options)	$	1,456,825
Monaco Loan (Old Debt)		3,372,844
Monaco Loan (New Debt)		(2,800,000	)
APIC (Premium)		(817,858	)

Difference to APIC*	$	1,211,811

The difference between the fair value of the new debt and the sum of the pre-modification carrying amount of the old debt and the share purchase option’s fair value represented a gain on extinguishment. ASC 470-50-40-2 indicates that debt restructuring with a related party may be in essence a capital transaction and as a result the gain upon extinguishment was recognized in additional paid in capital.

Schedule of Allocation of Cash Proceeds to Derivative Components at their Fair Values

The allocations of the three additional tranches were as follows.


	Tranche 3		Tranche 4		Tranche 5
Promissory Note	$	981,796	$	939,935	$	1,000,000
Beneficial Conversion Feature (“BCF”)*		18,204		60,065		—

Proceeds	$	1,000,000	$	1,000,000	$	1,000,000

Long-Term Obligation Maturities

Long-Term Obligation Maturities:


	Total		2017		2018		2019		2020		2021		More than 5 years
Long term obligations	$	4,335,501	$	—	$	4,335,501	$	—	$	—	$	—	$	—
Operating lease		481,920		240,960		240,960		—		—		—		—
Interest on obligations		611,945		491,000		120,945		—		—		—		—

Total obligations	$	5,429,366	$	731,960	$	4,697,406	$	—	$	—	$	—	$	—

Oceanica Resources S. de. R.L [Member]

Schedule of Allocation of Cash Proceeds to Derivative Components at their Fair Values

Based on the previous conclusions, we allocated the cash proceeds first to the debt at its present value using a market rate of 15%, which is management’s estimate of a market rate loan for the Company, with the residual allocated to the Oceanica Call Option, as follows:


	Tranche 1		Tranche 2		Tranche 3		Tranche 4		Tranche 5		Total
Promissory Note	$	1,932,759	$	5,826,341	$	2,924,172	$	1,960,089	$	1,723,492	$	14,366,853
Deferred Income (Oceanica Call Option)		67,241		173,659		75,828		39,911		26,509		383,148

Proceeds	$	2,000,000	$	6,000,000	$	3,000,000	$	2,000,000	$	1,750,0001	$	14,750,001

Note 2 [Member] | Monaco Notes [Member]

Summary of Significant Conversion Option Valuation Inputs and Results

Significant inputs and results arising from the Binomial Lattice process are as follows for the conversion option that is classified in equity after the modification in March 2016:


Underlying price on valuation date		$1.25
Contractual conversion rate		$1.00
Contractual term to maturity		1.82 Years
Implied expected term to maturity		1.82 Years
Market volatility:
Range of volatilities		96.0% - 154.0%
Equivalent volatilities		120.1%
Risk free rates using zero coupon US Treasury Security rates		0.29% - 0.68%
Equivalent market risk adjusted interest rates		0.52%